Kindred surged 19 percent to $9.86 for its biggest single-day gain in almost 15 months while Select Medical climbed 12
percent to $8.82, the largest increase since September 2009.

The Centers for Medicare & Medicaid Services proposed
yesterday to spread over three years a planned 3.75 percent cut
in payments for medical services at long-term care hospitals.
The decision gives the companies the 1.9 percent increase in
fiscal 2013. Money for short-term, or acute care, hospitals will
rise 0.9 percent under the proposal, primarily to cover
inflation and greater costs to serve Medicare, the U.S.
government’s health-care program for the elderly and disabled.

The proposal is “modestly better than our expectations,”
Sheryl Skolnick, an analyst at CRT Capital Group in Stamford,
Connecticut, said in a note to clients.

Acute-care facilities are the most numerous type of
hospitals in the country and include facilities owned by HCA
Holdings Inc. (HCA), the largest publicly traded hospital chain, and
nonprofits such as Cleveland Clinic. Medicare, one of the
largest sources of revenue for U.S. hospitals, pays about $100
billion a year to those facilities.

HCA, Tenet

Hospitals owned by Nashville, Tennessee-based HCA and
Dallas-based Tenet Healthcare Corp. (THC) would see an average payment
increase of 1.1 percent, according to Lazard Capital Markets
analysts led by Tom Gallucci, who called the proposed increase
“a bit below expectations.” Community Health Systems Inc. (CYH) in
Franklin, Tennessee, would get an average increase of 0.7
percent at its hospitals, Lazard said in a note to clients.

LifePoint Hospitals Inc. (LPNT) in Brentwood, Tennessee, which
specializes in rural hospitals, would see an average increase of
0.3 percent at its facilities, Lazard estimated.

The increase for acute-care hospitals takes into account
policy changes that will reduce payments to some rural
facilities, and will cost taxpayers $175 million, according to
the Centers for Medicare & Medicaid Services. The increase for
long-term care hospitals will cost about $100 million.

The changes, which aren’t final until a public review is
completed, would take effect in the year beginning Oct. 1. A
final rule on the 2013 payments is scheduled to be issued by
Aug. 1, the government said.

The increases don’t include automatic, across-the-board
cuts in Medicare payments that are scheduled to take effect in
January because Congress failed to agree to legislation last
year that would reduce the deficit.

Those 2 percent cuts, combined with the proposed increase
from Medicare, would mean a net 1 percent reduction in hospital
payments in 2013, said Jason Gurda, an analyst at Leerink Swann
& Co. in Boston, in a note to clients.